Homeowners beware of the low price!

I'm seeing a disturbing trend out there in the home improvement/repair industry:  competition is skyrocketing and price for the work is dropping.

Bruce Case, President of Case Institute of Remodeling, recently said that "...levels in competition have gone way up, frankly through the roof, which is unique among most industries, because most industries when there's challenging times you see less competition..."

Translation:  General Contractors that built houses are now doing repairs and remodels, those already doing remodels are now doing repairs, those doing repairs are still doing repairs, and those laid off have gotten their tool belt and gone out on their own to do repairs.  Competition is tremendous right now!

This is great for the homeowner, as the pool of available home improvement contractors is way up, but the pool of available work is flat at best and more likely down in the economy.  That means that prices are getting cut to get the work.  Cut to the bone in many cases!

But it's also not great for the homeowner.  How do they choose who to hire?  Getting 5 quotes has become standard in some cases.  And then price becomes the biggest (only?) factor considered by the customer.  And that's where trouble can start!

The contractors know price is king, so they figure out how to slash prices.  Usually it consists of one or more of these:  lay off workers, cut wages, cut overhead, delivery more quickly, or use less expensive materials.  The first two don't necessarily directly affect the homeowner as much as the last three, but let's explore each.

LAY OFF WORKERS

This can sometimes be good, as the first workers to go are usually (but not always) the least skilled.  It gives a company a chance to trim the fat.  But it also puts workers out on curb!  Typically workers like the benefits of a paycheck, such as eating and keeping the mortgage/rent paid, so they go back to work.  But are they qualified?  Are they insured?  Those can be scary questions, and often the answer to both is "No!"  Hiring this contractor to do your work can be a risky proposition.

CUT WAGES

This probably has the least effect on the customer but I can think of two things it can do:  

1. It can make the workers upset, and they don't pay quite as close attention to the details of your house repairs as they used to.
2. It can make the workers realize they need to shape up and be thankful to still be employed lest they be back in the first category!